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The house if fully paid off, and in her name only. They have been married 20 years. In their wills, they kept everything separate. So what was hers goes to her kids, and what was his goes to his children. Now that she has to be placed due to dementia, he has informed us that he will be moving out of the house. Now what happens? Can he just walk away leaving us with all the bills?

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Probably.. but why don;t you sell it and put the money into an account for Mom's care? That way you are not responsible for the bills, and she has future funds available to pay for her care.
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You are so lucky that husband #2 wants to walk away! Sell her house and put the money away to pay for her nursing home care. Talk to an accountant and/or elder attorney about how to protect as much of that money as possible.
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We are planning to sell it, and have an estate sale for everything inside for her care. Once we know we can since she is married, not sure if we have the legal right to do so. This is why we are worried about him just walking away. He may be he one with the legal rights. Can we do an estate sale for her items if he is her husband, and he just walked away from everything?
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I really think you need to talk to a lawyer who specializes in family law in your state. Was there a prenup? If the house is in her name, I don't see how he has any claim on it ( I am in a similar position, I own the coop,husband has no rights to the shares or the lease)
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Mary, a Power of Attorney would be needed in order to sell Mom's house since Mom probably would not be able to understand the legal documents involved with a sale. Hopefully she has one in place. If not, you would need to set an appointment with an Elder Law Attorney to see what can be done.
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I think that the house would go to him in the event of death in my state. But ...since she hasn't passed, I would think a POA would be needed for you to step into his place as her medical and financial decision maker. Make sure that you get real estate included.
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As a married couple, your mom and her husband are viewed as a unit by the Medicaid agency in your state. Before Medicaid starts paying for your mom's care, the couple's assets must line up with the Medicaid regulations in your state.

Your next call should be to an elder law attorney in your state who can explain the Medicaid eligibility rules to you. You'll then have a better idea of how to approach your stepfather, to explain to him why he can't just "walk away."

It's in everyone's interest to cooperate during this difficult time. Without cooperation and coordination of the Medicaid application process, all parties in this situation can end up with unexpected, costly, and unnecessary problems.
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Alas, I know first-hand what Mr. Roberts is talking about. All assets of both spouses are counted by Medicaid, even if there is a prenuptial agreement or some other arrangement intended to keep their funds separate. Wills are not taken into consideration.

The Medicaid application process for an individual is very straight forward. Most people can do that with a little help from a competent friend or relative. But applications for married people are far more complicated. Definitely seek the guidance of a lawyer specializing in Elder Law. 

Cooperation of the spouse is critical, because his financial information must be submitted to Medicaid when the time comes. He can continue to live in the house until he dies, according to Medicaid rules. Would he want to do that? Would mother want that? There will be a lien on the property to be satisfied after Mom and her spouse die. 

Please see the lawyer BEFORE you do anything with the house. It's complicated. Getting it right can save much grief and expense down the road!
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This was a good question. Learned a lot of new information.
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Is there a reason why the husband should have to continue living in the house, paying bills etc? Maybe he feels he could live cheaper somewhere else, maybe prefers to live somewhere else. If he is willing to leave why shouldn't he? Otherwise it seems that you are expecting him to keep a house afloat in which he/his heirs have no financial interest. If mom is not going to go home, why not sell the house to pay for her care?
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